Brambles Holdings Ltd. v. Federal Commissioner of Taxation

Judges:
Davies J

Court:
Federal Court

Judgment date: Judgment handed down 6 July 1990.

---

Davies J.

This action was commenced by writ of summons in the High Court of Australia and was remitted to this Court by an order of a Justice of the High Court made on 17 May 1989.

The issue is whether certain motor vehicles, refuse trucks, and certain rubbish containers, are exempt from sales tax under item 78 of Sch. 1 to the Sales Tax (Exemptions and Classifications) Act 1935 (Cth) (``the Act''). That item exempts, inter alia:

``Goods for use (whether as goods or in some other form) and not for sale by -

• (i) a municipal, shire or district council constituted for the general purposes of local government under any law of the Commonwealth or of a State or Territory;
• (ii) a public authority constituted under any law of the Commonwealth or of a State or Territory for the purpose of carrying out any or all of the functions ordinarily carried out by a council of the kind specified in paragraph (i);''

In 1986, and for some years prior, the plaintiff, Brambles Holdings Ltd., which carried on business under the name ``Cleanaway'', by which name I shall hereafter call it, provided for the City of Knox (``the council''), a rapidly developing municipality on the east side of Melbourne, a rubbish collection service whereby it emptied the rubbish bins left out by households and disposed of the rubbish so collected. In 1986, it was decided by the council to introduce a system whereby each household was provided by the council, for use in lieu of the household's own rubbish tin, with a 240 litre mobile garbage bin (``MGB''). Each MGB, being much larger than the ordinary household rubbish bin, would be emptied only once a week.

The council sought tenders for a new refuse collection contract. Cleanaway was the successful tenderer and, on 29 July 1986, a new contract was executed for a 10-year period commencing Monday 6 October 1986 and terminating 30 September 1996 with an option of renewal by the council for a further term of two years.

The contract provided for the supply by Cleanaway for hire by the council of a sufficient number of MGBs, approximately 33,000 being required. The expected life of each MGB was approximately 10 years and, accordingly, the MGBs supplied would have an effective life approximating the term of the contract.

In respect of the MGBs the contract contained these conditions, inter alia:

``4.4.1 The Contractor shall supply for hire by the Council a sufficient number of wheeled containers to enable the efficient performance of this contract. Such containers shall be of 120 or 240 litre capacity and shall be constructed of moulded high density polyethelene fitted with solid rubber tyres and an axle of galvanised hardened steel. The colour of the wheeled containers shall be green for residential premises and black for commercial premises.

4.4.2 The Contractor shall maintain in good order all wheeled refuse containers hired by the Council for use at both commercial and residential premises throughout the municipality.

4.4.3 The wheeled containers hired by the Council shall be delivered by the Contractor to residential premises at least one week prior to 6th October, 1986.

...

4.4.5 All wheeled containers supplied and delivered by the Contractor in accordance

---

ATC 4586

with this contract shall be permanently marked with the Contractor's name, City of Knox and be consecutively numbered and show date of manufacture. All such wheeled containers shall be embossed on the lid with the following Warning: `NO HOT ASHES OR CORROSIVE MATERIAL. WASH REGULARLY.'

...

4.4.7 All wheeled containers supplied and delivered by the Contractor in performance with this contract shall be of the specification approved by the Council.''

The refuse trucks were not to be hired to the council. The following contractual terms may be noted:

``5.13.1 The Contractor shall provide and maintain throughout the term of this contract a sufficient number of motor vehicles and all necessary plant to be approved by the Council to carry out the works and services herein specified in a thorough and efficient manner.

5.13.2 All vehicles used in this contract shall be of a compactor type of minimum full load of 18 cubic metres and capable of a compaction ratio of 2 loose cubic metres reduced to 1 compacted cubic metre and shall be constructed in such a manner that all loading may be carried out without recourse to the removal of any covers, be they rigid or otherwise and the vehicle shall be such that at no time during loading or transporting of the garbage will rubbish, once placed in the unit, be in any way exposed to the weather, exposed to view or permit flies to gather thereon. Further, on no account will the consolidation of garbage be permitted in the vehicle other than by mechanical means. The vehicles shall house the collected garbage in such a manner that in the loading and transport of the garbage, no refuse may be blown out or dislodged from the vehicle. Each collection vehicle shall be equipped at all times, whilst carrying out the collection process, with a broom and shovel of a type satisfactory to the Council.

5.13.3 All vehicles shall be kept clean and washed down both inside and outside at least once per week. Cleansing must be carried out at a Depot site maintained by the Contractor and the Contractor shall state in his Tender where such site is to be located and the method that will be employed in the cleaning of the vehicles.

...

5.21 Marking of Vehicles

All vehicles used in performance with the requirements of this contract shall be marked near the top of the load carrying section with the letter K in no less than 200 millimetres in depth and shall be followed by a number of similar size. Vehicles used shall be numbered consecutively and such letters and numbers shall be on the front and rear of the load carrying section as aforesaid. Such lettering and numbering shall be painted on the vehicles with a paint which contrasts with that of the body and shall be to the satisfaction of the Council.''

As can be seen, it was intended that Cleanaway would hire to the council a sufficient number of MGBs, that Cleanaway would deliver the MGBs directly to each household in the municipality and, using its special refuse trucks, would empty each MGB once per week. The MGBs and the refuse trucks were to be appropriately marked.

Under sec. 48(1) and 63 of the Health Act 1958 (Vic.), the council had the responsibility for rubbish collection in its municipality but was empowered to arrange by contract for appropriate rubbish collection services. The Health (General Sanitary) Regulations 1985 (Vic.) provided, inter alia:

``30(1) Unless exempted by the Council, the proprietor of every premises in every city, town, borough and township shall provide a proper and suitable receptacle (or receptacles) for temporarily storing all refuse (including animal manure) produced or accumulated on such premises and which is offensive or likely to become offensive.

...

31 The Council shall cause -

• (a) all refuse which is offensive or likely to become offensive to be collected and removed from the premises once in each week, or, in case of specified premises, at shorter periods as are required;
• (b) all trade or other refuse which is not offensive or not likely to become

  ---

  ATC 4587

  offensive to be collected and removed from the premises at those periods of time as the Health Surveyor directs.''

The council itself passed by-law No. 42, published in the Victoria Government Gazette on 26 November 1986, of which relevant provisions read:

``4. In this by-law, unless inconsistent with the context or subject-matter -

• ...
• `Multi User Receptacle' means a wheeled receptacle of in excess of 240 litres constructed of either high-density polyethelene or galvanized steel having a self-closing lid capable of being locked. Such multi user receptacle shall be fitted with not less than four wheels and shall be able to be locked in situ. Such receptacle shall hereinafter be described as a Multi Use MGB.
• ...

5. The proprietor shall use the MGB provided by the council as defined in Clause 4 hereof and shall cause all refuse and rubish [sic] produced or accumulated upon such premises to be deposited in such MGB. Provided that refuse matter of such shape size or weight which cannot be contained in such MGB shall be excluded.

6. The proprietor of any premises shall not cause suffer or permit any other receptacle to be used for the storage of refuse where an MGB has been provided. However, the provisions of this clause shall not prohibit the temporary storage of waste matter in another container prior to transfer to such MGB or Multi Use MGB.

...

11. The proprietor of every premises to which the council has supplied an MGB shall cause such MGB to be placed adjacent to the kerb at the front of such premises or at such other place as may from time to time be approved by council by 6 o'clock in the morning of the day allocated for the removal of refuse.

...

14. The proprietor of every premises shall cause the MGB provided by the council at his premises to be maintained at all times in good order and in a sanitary condition.

15. The proprietor of premises shall on becoming aware that the MGB provided by the council to his premises has become damaged, developed any defect, become lost, stolen or missing, notify the council within seven (7) days of such occurrence.

...

18. Any person who causes any MGB or Multi Use MGB to be damaged by placing same on any carriageway or by placing hot materials or any other material deleterious to the material from which the MGB or Multi Use MGB is constructed shall be liable to the cost of replacement of such receptacle.''

The council advertised the new service by means of newspaper articles and brochures.

Pursuant to its contract, Cleanaway delivered an MGB to each household and provided a refuse collection service to each household, the MGBs being emptied once per week. Any complaints which the householders had with respect to the service were made to the council and the council would investigate and deal with any such complaint. The council arranged through Cleanaway for the replacement of any MGB which had been stolen or become damaged. Likewise, if Cleanaway had any complaint with respect to a household, the council would deal with that complaint. Each month, Cleanaway rendered its account for the services provided. The rate per week for each service included a component representing the hire of each MGB.

The case submitted by Mr D. Bloom Q.C., senior counsel for Cleanaway, was that the refuse trucks and the MGBs were ``Goods for use... by'' the council for the reason that they were provided and intended for use in an operation, refuse collection, which was a statutory responsibility of the council. He submitted that the council had a degree of control over the whole operation of refuse collection, being able to give directions with respect to the use of the MGBs, the cleanliness of the refuse trucks and so on. Mr Bloom relied upon the fact that the contract provided for the hire by the council of the MGBs from Cleanaway and on the fact that the refuse trucks were used only in and were marked for use in the refuse collection service.

---

ATC 4588

In
D.F.C. of T. v. Stewart & Anor 84 ATC 4146; (1984) 154 C.L.R. 385, it was pointed out that the First Schedule to the Act describes exempted goods principally by reference to the nature or character of the goods themselves or by reference to the use to which the goods are to be put. As Gibbs C.J. said at ATC p. 4149; C.L.R. p. 390:

``In many cases of the second kind the words `for use' indicate the purpose to which it is intended the goods shall be put, rather than the use for which the goods were designed.''

The members of the Court pointed out that the prescribed test is to be examined as at the point of time at which the relevant and applicable Sales Tax Assessment Act imposes liability for duty. Gibbs C.J., with whom Dawson J. agreed, Brennan and Deane JJ. each explained that exclusivity of use was not required. At ATC p. 4149; C.L.R. pp. 390-391 Gibbs C.J. said:

``The word `use' does not connote exclusive use.... No doubt an article would not fall within Item 81 if the use to which it was to be put by the hospital or institution was transient or insubstantial; the suggestion in
F.C. of T. v. Hamersley Iron Pty. Ltd. 81 ATC 4582 at p. 4590; (1981) 37 A.L.R. 595 at p. 605, that the goods must be for use `to a significant degree', would appear to be correct. However if the goods are intended to be put to substantial use by a public benevolent institution, they will fall within Item 81 notwithstanding that they may be applied to the use of others as well.''

At ATC p. 4153; C.L.R. pp. 397-398 Brennan J. said:

``The use by a public benevolent institution referred to in Item 81 is not necessarily exclusive of the use of the goods by others. Indeed, the use of particular goods by others is often the use intended for them by public benevolent institutions - hospital beds, for example. But the proposed use by a public benevolent institution must be sufficiently substantial in extent and time that it is right to regard that proposed use of the goods as giving a character to the goods. That is a question of fact and degree. Among the material circumstances which reveal a characteristic use, regard may be had to the nature of the goods, the activity of the institution which is to be advanced by using the goods, the terms upon which the goods are to be acquired by the institution or upon which the institution is to be entitled to use them, the power of others to determine or qualify that use, and the likelihood of the use being changed by the decision of the institution, by the decision of another person having power to determine or qualify the use or by the decision of both the institution and that person. As the question whether goods were goods for use by a public benevolent institution is likely to arise for determination after the institution has begun to use them, evidence of the actual use to which the goods have been put will be relevant and admissible.''

At ATC p. 4155; C.L.R. pp. 401-402, Deane J. said:

``From this variety of references to `goods for use', three presently relevant points emerge with tolerable clarity. The first is that, where it is intended that goods be for use exclusively or `primarily and principally' before they come within a particular exemption, the First Schedule expressly says so. The second is that, where the relevant requirement is that goods be `for use by' a particular person or organization (e.g. the Governor-General, the Governor of a State, certain Navy, Army and Air Force Institutions, a public benevolent institution: Items 73, 73A, 74E, 81(1)), the requirement is referring to projected actual use rather than the inherent quality or nature of the goods themselves. The third is that, in those items (such as Item 81) where it is required that goods be `for use' by a particular category of person or organization, there is no designation of any person, such as the manufacturer or the purchaser of the goods, by reference to whose purposes or intentions the question whether the relevant requirement is satisfied must be determined....

Item 81 does not require that the goods be used `exclusively' or `primarily and principally' by a public benevolent institution. It suffices that the goods come within the classification of goods for use by such an institution. That does not mean that any intended or planned or possible

---

ATC 4589

subsequent use of the goods by a public benevolent institution, however transient or insignificant or uncertain, would justify the goods being characterized as `goods for use' by that institution. The projected use by the institution must be such as would warrant characterization of the goods by reference to it. Ordinarily, that would involve definite commitment to a use by the institution as the main projected use of them. In other words, the question whether particular goods satisfy the description of being goods for use by a public benevolent institution will ordinarily fall to be answered by identifying the relevant projected use of the goods and by ascertaining whether that use answers the description of a use of the goods by a public benevolent institution.''

Therefore, to meet the description of goods ``for use by'' the council, the intended use by the council, if not exclusive, must be sufficient so to characterise the goods. In Stewart's case, in the instance where goods ``may be applied to the use of others as well'', Gibbs C.J. thought that ``substantial use'' by the designated authority would be sufficient. At ATC p. 4153; C.L.R. p. 397, Brennan J. thought that the use ``must be sufficiently substantial in extent and time that it is right to regard that proposed use of the goods as giving a character to the goods''. At ATC p. 4155; C.L.R. p. 402, Deane J. thought that ordinarily the question was whether the ``use answers the description of a use of the goods by a public benevolent institution''. In the end, the question is whether, as a matter of ordinary language and understanding, the subject goods fall within the category of goods described by item 78. See also
D.F.C. of T. v. Rotary Offset Press Pty. Ltd. 71 ATC 4170; (1971) 45 A.L.J.R. 518,
Rotary Offset Press Pty. Ltd. v. D.F.C. of T. 72 ATC 4212; (1972) 46 A.L.J.R. 609 and
F.C. of T. v. Thomson Australian Holdings Pty. Ltd. & Ors 89 ATC 4696; (1989) 87 A.L.R. 682.

It may be noted that, in
Tourapark Pty. Ltd. v. F.C. of T. 82 ATC 4105; (1982) 149 C.L.R. 176;
Hamilton Island Enterprises Pty. Ltd. v. F.C. of T. 82 ATC 4302; (1982) 43 A.L.R. 519 and
Kirby v. F.C. of T. 87 ATC 4503, it was held for the purposes of other legislation that goods which are bailed may be regarded as being used both by the lessor who uses the goods by leasing them and by the hirer or charterer who takes them under contract. Thus, in Hamilton Island, it was held that Seaworld Pty. Ltd., which operated a marine and amusement park, used helicopters which it chartered from Hamilton Island Enterprises Pty. Ltd. with crew, notwithstanding that its use was limited to advertising scenic or joy flights and arranging the sale of seats and the embarkation of passengers. Seaworld used the helicopters through the charter.

In the present case I am satisfied that the refuse vehicles, which were owned and operated by Cleanaway, were not ``for use by'' and were not used by the council. Their operation by Cleanaway served a purpose of the council but the council had no rights in respect of the vehicles. It did not possess them or have any right to do so. It had no right to control them. The council's rights were limited to overseeing the proper performance of the rubbish collection service according to the terms of the contract. The vehicles were used by Cleanaway, not by the council and were used by Cleanaway in the performance of its contract with the council. The vehicles would have come within the description in item 78B(1) ``Machinery and equipment for use exclusively or primarily and principally... in the course of carrying out contracts for a... council... of a kind referred to in item... 78'' but for other reasons did not fall within that item.

The MGBs were, however, in a different position. The MGBs were hired to the council. The council had rights of use over the MGBs and, as was contemplated by the council's by-law No. 42, they were provided by the council to individual householders who were responsible to the council for the care of the MGBs and for any damage which might ensue from wrongful use. It follows that the MGBs were used by the council. That use was not transient or insubstantial.

Mr A. Emmett Q.C., senior counsel for the Commissioner, submitted that the bailment constituted by the hiring was of no consequence for the householders themselves took the MGBs on bailment from the council. Therefore, so the argument went, the council was left without any substantial or significant use or right of use. It seems to me, however, that the use by the council was a continuing and substantial use. Notwithstanding the delivery and the provision of the MGBs to the householders, the

---

ATC 4590

council retained ultimate control over them and each householder was responsible to the council for his bailment. The use of the MGBs by the householders was the use to which the council put the goods.

Thus, in their own ways, Cleanaway, the council and the householders each used the MGBs. To adopt the expression of Brennan J. in Stewart's case at ATC p. 4153; C.L.R. p. 398, the MGBs were used for the mutual advantage of Cleanaway, of the council and of the householders.

In Stewart's case, the use of the subject equipment was in premises occupied by a hospital and, therefore, the hospital had actual possession of and control over the goods. As Gibbs C.J. said at ATC p. 4149; C.L.R. p. 390, it matters not that goods which a hospital may use, such as its beds, chairs and other furniture, may also be used by patients or visitors. Such a use is use by the hospital and is the use to which the hospital puts the goods. The present goods, the MGBs, however, were located not on council premises but in the private premises of each householder. The council did not retain possession of the MGBs. Possession was with the householders who had the ongoing physical use of them. Therefore the facts are not as strong as in Stewart's case.

Nevertheless, the goods were used by the council by being provided to the householders for the purposes of the rubbish collection service for which the council had statutory responsibility under sec. 48(1)(a) of the Health Act 1958 (Vic.). The MGBs were designed and marked expressly for that purpose and were devoted throughout their life to that purpose. As item 78 did not require that the council's use be the exclusive, or even the primary and principal use, that use was sufficient to answer the description in item 78. The use satisfied the purposive element of the description, was substantial and was sufficient to characterise the goods as goods answering the description.

In these circumstances, I am satisfied that item 78 applied to the MGBs.

Mr Emmett submitted formally, in case this matter should ultimately go to the High Court of Australia by way of appeal, that items such as item 78 do not apply unless the nominated person or authority, in this case the council, obtained the benefit of the exemption from sales tax. That was the substance of the contention though it was not developed in argument before me, a similar argument having been rejected by Gibbs C.J. and Dawson J. in Stewart's case. I make no comment thereon save to observe that, if the submission is dependent upon the existence of a factual basis, the relevant facts have not been examined in the proceedings before me.

I direct that within 14 days, the parties should bring in short minutes of order giving effect to these reasons for judgment. The short minutes should deal with the question of costs, which I have not discussed.

THE COURT ORDERS THAT:

The parties bring in short minutes of order within 14 days.